Defining Hedge Funds

A hedge fund is an alternative investment vehicle available to sophisticated/accredited investors that can be either institutional or wealthy individual investors. This pooled investment structure can take the form of a limited liability company or a limited partnership. These investment structures have a limited amount of investors ranging from 100 to 500 and are not heavily regulated such as mutual funds do. Although hedge funds are not allowed to advertise to the public, many of them choose to register with the SEC to be able to increase their investor base and decrease the minimum capital requirements of investor entry.

The main idea behind the formation of hedge funds is that these types of investment funds are supposed to perform under a positive or a negative market environment and preserve the invested capital from market uncertainty. Therefore, as a hedge fund aims to perform regardless of what the market is doing, its performance is measured in terms of absolute returns unlike the relative-to-benchmark returns of the mutual funds.

Hedge funds are also famous for two more characteristics: The first is their high level of flexibility when it comes to the structure of their investment strategies. They resemble mutual funds in the sense that they are both professionally managed portfolios that can invest in traditional securities such as stocks and bonds, but they offer managers substantial space for maneuver due to the lack of restrictions while forming and executing their investment policy. The hedge fund manager faces fewer investment constraints than the mutual fund manager and can adjust or change completely the investment strategy based on the circumstances. Hedge fund managers can also use short selling, derivative products and leverage techniques that aim at the maximization of returns. They can also invest in various other alternative asset classes in various geographies.  There are numerous hedge fund strategies with the most common of them being the Event-driven strategy, long/short equity, global macro, managed futures strategy, statistical arbitrage, convertible arbitrage, fixed income arbitrage, equity market neutral, emerging markets, and distressed securities among others. Of course, there are various combinations of these strategies and also the fund of funds strategies that aim at a further diversification of risk and locking-in a pre-determined return range.

The second characteristic is the traditional fee structure that hedge funds charge. The well-known “two-twenty” rule states that hedge funds earn two percent of net assets per year under any market condition plus the 20% of profits (always above a specified hurdle rate). Of course, this payment structure has its limits and in the case that a hedge fund faces serious losses, cannot earn any additional payment unless it makes up for the losses. This is the fee structure that most hedge funds operate although there have been reductions to it during the last years mainly driven by pension funds and other institutional investors requests. The “Alignment of Interests Association” (which represents pension funds, foundations, endowments, and family offices in the US) has questioned this model and has proposed several changes like a tiered management fee. Moreover, several recent studies suggest that the average management fee has reached closer to 1.5 percent which indicates a shift in the industry standards.

There are several reasons why investors choose hedge funds in their overall investment context. Mainly investors prefer hedge funds as most of the times, hedge fund founders have made a significant capital investment in their fund and provide a successful track record accompanied with a highly sophisticated proprietary model. As a result, the level of certainty is raised for the potential investors. Hedge funds also provide a good diversification level for an investor as the returns of the fund usually do not correlate with the returns of the stand-alone traditional asset classes. Investors of hedge funds also like the downside protection that these investments offer. Long-only portfolios like mutual funds, don’t provide this protection layer as they cannot take short positions in order to benefit from a declining market as hedge funds do. Also despite the fact that market efficiency is considered to be present, in real situations what hedge funds are trying to do is to exploit in the best way possible any market inefficiency that may arise. They form their strategies in such a way that will add “alpha” due to their active management.

Hedge funds can be chosen as an investment in both bull and bear markets. However, they tend to perform better in volatile times. An accredited investor should always study well the fund’s track record before deciding to invest in a hedge fund strategy and have a very clear outline of what to expect from each strategy. After all, hedge funds are not all the same; thus they don’t provide the same safety (downside protection) and upside potential to their investors. Some of them thrive whereas some of them fail. What hedge fund history has shown us is that those funds that have continuity on their performance over the years are those that considerably evaluate their market risk, liquidity and leverage exposures.   


Best Stock Market Investment Apps


Whether you’re just starting in investing or are a seasoned professional, there are apps that will help you stay up to date on the ever-changing market. These days, our phones are seen as indispensable, and these apps will give you updates while you’re on the go or at home. So if you just need help navigating the investment waters as a beginner or you’re looking to have an edge over other investors, take a moment and check out these apps.



If you are currently investing in the stock market or would like to learn more about specific stocks, it’s worth it to join StockTwits. StockTwits is a social network that is similar to Twitter, but it’s focus is on stocks. The users are investors and traders that give real-time updates and the site also pulls valuable information about specific stocks from the web. When you’re a member, you can connect with other traders and receive advice from people who are actively investing in the stocks that interest you, making it useful for both investors and beginners who have an interest in learning more about investing. This app is a game-changer for the investment world because this sort of service of compiling so much data used to take a long time to gather and a lot of money for investors.



This app is a social investment network, that allows both investing professionals and first-time investors to share a space online and give updates about what they’re investing in. For those who don’t have time to watch the stock market or conduct thorough research on stock movement, this app gives them the opportunity to connect and network with investors and get their advice on specific stocks. It even gives users the ability to review the trading history of a specific trader and copy their trades upon review of their portfolio. eToro’s interface is free and easy to operate, which is great for beginners and seasoned investors alike. For beginners, there are features in the app that allows them to learn about investing and gives them $10,000 in practice money so they can try their hand at investing before actually using their own money towards stocks.


Bloomberg Business

The Bloomberg Business app provides investors with breaking news regarding specific stocks they are investing in. Rather than searching for each stock, you can create a profile on the Bloomberg Business app so that you receive any and all information, straight to your smartphone. This app allows you to easily access data and analysis about stocks from as far back as 10 years so you can make informed decisions about your portfolio. Track your portfolio on the go and continue to stay up to the minute on economic and company news while you’re away from the office. While this app is a valuable tool for the professional, it is also great for those who are just starting out and want to stay current on their portfolio.

What is Executive Coaching and Why You Should Consider It


Being a CEO or business owner has its share of challenges and opportunities. Among other things, being a great leader to your employees means being willing to help them be the best that they can be in their current role and give them the tools necessary to achieve great leadership skills. Your employees that hold aleadership position and the standout, stellar employees that would be a great fit for management, need to be continually encouraged to grow into a role they can be proud of, and will only improve the operations within the organization.

Even the best leaders in your organization can benefit from executive coaching, which will challenge them and give them the opportunity to improve their management skills. An executive coach is a qualified professional that has a unique insight into the inner workings of management and can help them figure out how to improve what they’re doing and what skills to adopt so they can be the best they can. Rather than giving them all the answers like in a training seminar, an executive coach acts as a soundboard for the employee, challenging your employees’ ideas and getting them to the best answers without coming right out and telling them. Your employee will likely have problems and issues they would like to work on, and instead of saying what to do to solve them, the executive coach will work with them to come up with a solution that makes sense.

In order to understand what executive coaching is, it’s important to realize what it’s not. It’s not to be used to make poor-performing employees better. Executive coaching is definitely not a viable option for employees who don’t believe they need to make any changes to be successful. The person needs to believe that they can benefit from this type of personal development for it to be worthwhile for your organization. Employees that are already not performing well or are not making a conscious effort to be an indispensable member of your team should also not be considered. Executive coaching is meant to help those who are already great leaders and those that show potential to be leaders, even better at their job and add worth to your company.

Executive coaching takes a significant amount of time for it to benefit your organization and so that you can see a return on the investment. Realize that this is not a quick fix for those that have no business in being in a managerial role and for those that are truly adding worth or are likely going to add significant value to your organization over time.

Common Leadership Mistakes and How to Avoid Them

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Entrepreneurs running their own businesses are going to need to be leaders that inspire and motivate their teams. It goes without saying that most people that first settle into their role as a leader will inevitably take missteps and make mistakes. Instead of becoming frustrated by the mistakes, a true leader and capable entrepreneur will learn from the actions that don’t work and move toward correcting them to be more productive. The following mistakes are quite common amongst entrepreneurs, those new to a leadership role, and even the seasoned professional leader.


Not delegating work effectively

Delegating work to your employees is absolutely essential as your business grows. Being able to not only assign tasks to your employees but also be wise in who you distribute tasks to is going to help you be a more effective leader. Assess your team members strengths and weaknesses and allocate the work accordingly. Be willing to listen to your employees, if they’re willing to try something new that is not specifically in their wheelhouse, give them a chance as they may surprise you.


Being too hands-on or too hands-off

Some leaders pride themselves on being a more laid-back leader, while others take the opposite approach and tend to micromanage. These two polar opposites will not do you any favors as a leader. Try to figure out how you can be somewhat hands-off but also know what your employees are doing on a day to day basis. This can be a challenge and it will likely take practice in order to strike this balance.


Not building up your employees

Most people will thrive when they feel like their employer cares about their own growth and when they believe they are instrumental in the success of the business. One way to build up people is by offering them tools to grow their expertise further through continued training offerings. These pieces of training will not only help ensure that you have employees that are well-trained in their line of work, it will also likely motivate and better equip your employees to handle changes in the workplace.

Another way to build up your employees is by rewarding them for their excellent work on an important project or professionalism in dealing with a difficult client. Whatever the case may be, when an employee is significantly challenged and manages to come out on top, they should be rewarded.

These leadership mistakes may seem quite avoidable, however, it is easy to make them, especially early in your career as a leader. Make sure to assess your leadership techniques regularly and make sure you are being effective. If you do make a mistake, learn from it and you will continue to grow as a leader.